Automakers Race to Invest in Mining

Charles Rivers Associates recently released a report on the electric vehicle recharging market in the EU27 + UK, with a particular emphasis on the competitive landscape in Belgium, Croatia, Ireland, and Italy. These four countries were chosen to provide in-depth insights into the European market dynamics, considering factors such as market maturity, geographical diversity, and infrastructure development.The report presents several key findings, which are as follows:
To meet the growing demand for EVs, automakers are realizing the need to secure sufficient quantities of lithium, nickel, and cobalt. These metals are vital components in EV batteries, and automakers fear the risk of being left behind if they fail to secure future supplies. This fear has led to a significant industry-wide shift towards investing directly in the mining sector. By doing so, automakers aim to secure exclusive off-take agreements and ensure a consistent supply of battery inputs.

General Motors has made a notable move by investing $650 million in Lithium Americas Corp, primarily to support the development of the Thacker Pass lithium project in Nevada. This investment grants GM exclusive rights to 40,000 tonnes per year of domestically sourced lithium, which is crucial for the company to qualify for EV subsidies under the Inflation Reduction Act. GM’s move represents a strategic step towards securing a long-term and sustainable supply of a critical battery metal.

Stellantis, one of the world’s largest automotive groups, recently made a significant pivot into the copper sector by investing $155 million for a 14.2% stake in McEwen Copper. This subsidiary of McEwen Mining owns the Los Azules copper project in Argentina, ranked among the top 10 global undeveloped copper resources. Stellantis’ investment not only secures access to a vital component of EVs but also aligns with the company’s global electrification plans. The project aims to produce 100,000 tonnes per year of refined cathode starting in 2027, highlighting the strategic importance of copper in the EV revolution.

While lithium has dominated discussions surrounding battery metals, copper plays a crucial role in EVs as a current collector. It is used not only within the battery pack but also in the electric motor, busbars, and internal wiring. The International Energy Agency (IEA) states that lithium-iron-phosphate batteries, a significant segment of the EV market, require approximately 50% more copper than nickel-manganese-cobalt batteries. As automakers recognize the increasing significance of copper, they are venturing into mining investments to secure this essential metal.

Although investing directly in the mining sector provides automakers with potential advantages, it also presents challenges. Greenfield mines, particularly those employing new processing technologies, often experience delays and cost overruns. Furthermore, historical precedents, such as Henry Ford’s vertically integrated model, serve as cautionary tales of the potential pitfalls of such ventures. Ford’s Brazilian rubber plantations, intended to supply tire production, faced numerous challenges and ultimately became obsolete with the advent of synthetic rubber. Automakers must carefully navigate these risks as they expand their mining investments.

The race for electric vehicle battery metals is driving automakers to invest directly in the mining sector. By securing off-take agreements and participating in mining projects, automakers aim to ensure a stable and sustainable supply of lithium, nickel, and other crucial battery metals.

Source: Reuters, The Oregon Group

Source: The Oregon Group
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